Styrenix Performance Materials Ltd Q1 FY27 Earnings Call Summary

Event Participants

Executives

2 Bhupesh Porwal - CFO (opening remarks), Rahul - Senior Management (Q&A responses), Chintan Doshi - Manager of Legal and Company Secretary (closing)

Analysts

8 Aditya Khaitan - SMIFS Institutional Equities, Deepak Poddar - Sapphire Capital, Dhaval Shah - Girik Capital, Krunal Shah - Edelweiss Asset Management, Nirav Jamuria - Anvil Wealth, Priyank Cheta - Vallum Capital, Prerak Gandhi - Sowilo Investment Managers LLP, Rahul Agarwal - IKIGAI Asset Management, Ronak Chheda - Awriga Capital Advisors LLP, Tushar Raghatate - Omega Advisors, Vidisha - CNK UAE

Financials & KPIs

Geographic & Segment Commentary

India - ABS: OEM accounts for roughly 70%+ of ABS volumes, with non-OEM balance. Demand impact was muted in OEM/auto sector but more pronounced in non-OEM/unorganized segment. Production numbers for auto sector remained more or less flat, while appliances saw greater impact on production.

India - Polystyrene: OEM is closer to 50% of volumes with non-OEM at balance. Non-OEM segment experienced significantly more demand impact than OEM. Market-wide demand decline estimated at 15-25% for the quarter across both product segments.

Thailand: Operating at low utilization levels on specific products; demand impact relatively muted given lower base. Sales strategy involves brand transition from the predecessor company to Styrenix's own grades, with sales teams deployed in Shanghai, Vietnam, Seoul, and Osaka driving customer validations (12-24 month cycle). Competitiveness challenged by Chinese production oversupply; management targets stronger margin profile within three years as volumes scale.

Company-Specific & Strategic Commentary

Raw Material Sourcing: Styrene monomer traditionally sourced from the Middle East (Strait of Hormuz) has required alternate sourcing with 10-15 day longer lead times; management has built slightly higher inventory levels (higher than prior quarter) to secure supply. Raw material prices: styrene monomer moved from ~$1,000 (pre-war) to $1,600-1,700 peak, moderating to $1,100-1,400 range; butadiene (sourced locally) spiked from $1,000 to $2,500+ before easing; acrylonitrile moved from $1,200 to $1,800-1,900 peak, now $1,400-1,600.

ABS Capacity Expansion: 50,000-ton brownfield expansion on track for commissioning within FY27; no exact month given due to running-plant complexity. SAN merchant sales (~15,000-20,000 tons/year) to continue unaffected as rubber, SAN, and compounding capacities are all being expanded to support the new ABS capacity.

New Business Development: No significant incremental wins directly attributable to the supply chain crisis; customer qualification cycles are structural and long-term. Growth strategy prioritizes ABS expansion; polystyrene expansion will be considered as business case develops.

Capital Allocation: Consistent philosophy - fund growth capex, maintain ratios, return excess cash to shareholders. No change in approach despite elevated cash generation from last two quarters.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Demand Decline & Segment Split (Nirav Jamuria - Anvil Wealth)

• Question: How was demand in India for ABS and PS YoY, and was volume decline due to raw material availability or price-related demand destruction?
• Answer: Demand disruption across both segments driven by Middle East instability; price surge created wait-and-watch behavior, particularly in non-OEM/unorganized sector. OEM impact muted relative to unorganized sector. Market-wide demand decline estimate: 15-25%. (Rahul)

Import Data / Competitive Environment (Nirav Jamuria - Anvil Wealth)

• Question: What is the import situation for ABS and PS into India?
• Answer: Government no longer sharing import/export data; based on market intelligence, no significant variance in imports. Traditional Middle East exporters facing production/energy challenges from Strait of Hormuz disruption, reducing their ability to quote aggressively in Indian market. (Rahul)

Margin Sustainability & OEM-Non-OEM Mix (Aditya Khaitan - SMIFS Institutional Equities)

• Question: What is the sustainable run rate of margins when benefits revert? Historically margins were 10-12%.
• Answer: India OEM is ~70%+ of ABS volumes (50% for polystyrene). Current elevated margins are "just a snapshot in time... not indicative of sustainable business." Management advises basing analysis on historical normalized performance; expects volume correction once situations normalize and return to same operational basis as past. (Rahul)

Demand Catch-Up & Structural Channel Change (Priyank Cheta - Vallum Capital)

• Question: Given end-consumption hasn't declined as much, should balance nine months see high-teens/mid-teens volume growth from channel restocking?
• Answer: There is stocking/destocking at multiple levels; auto demand muted impact, appliances impacted. No structural shift to imports confirmed. Management anticipates demand returning when normalization occurs but cannot predict timing given continued volatility. Margin normalization expected to historical levels - "best to assume things normalize to the same levels" with no significant margin expansion. (Rahul)

Inventory Position & Raw Material Strategy (Rahul Agarwal - IKIGAI Asset Management)

• Question: How did plants run given low demand? What's the finished goods and raw material inventory situation?
• Answer: Finished goods inventories in line with sales forecasts; production matched demand expectations. Raw material inventory slightly higher than prior quarter due to supply chain uncertainty. Styrene monomer alternate sourcing secured with 10-15 day longer lead times. Prices: styrene $1,100-1,400, butadiene moved from $1,000 to $2,500+ peak and eased, ACN $1,400-1,600 range after spiking from $1,200 to $1,800-1,900 peak. (Rahul)

Capital Allocation Philosophy (Rahul Agarwal - IKIGAI Asset Management)

• Question: How will the company utilize the ~₹100 crores of incremental cash flow from last two quarters?
• Answer: No change in capital allocation philosophy - fund growth capex, maintain ratios, return excess cash to shareholders. "The company typically doesn't hold on to too much capital if it doesn't utilize it... whatever cash is not needed is returned to shareholders." (Rahul)

Current Quarter Pricing Dynamics (Deepak Poddar - Sapphire Capital)

• Question: How has pricing been in July-August vs Q1? Is the current margin gap from pricing mismatch still present?
• Answer: Management does not comment on current quarter specifics. Raw material and finished product pricing move in tandem in normalized scenarios; "extraordinary circumstances" create short-term gaps. Previous quarter pricing was significantly higher than prior quarter but moderated towards quarter end. Abnormal margins confirmed as gap-driven. (Rahul)

OEM Inventory Dynamics (Dhaval Shah - Girik Capital)

• Question: Did auto sector sit on polymer inventory? How do auto OEMs manage their purchasing?
• Answer: Tier-1 molders buy directly from manufacturers; OE specifies grades and assigns share of business through formula-driven systems. Some smaller volumes routed through distributors. Auto production flat in Q1, supply accordingly. Pricing adjustments in short-term mechanism ensured customer supply continuity amid supply chain disruption. (Rahul)

Thailand Demand & SE Asia Expansion (Krunal Shah - Edelweiss Asset Management)

• Question: What's the demand environment in Thailand and competitive intensity?
• Answer: Thailand operating at low utilization on specific products; demand impact less significant than India given lower base. Market building activity remains on track with good customer feedback, but hasn't translated to significant volume growth as normalization takes time. Regional demand destruction dynamics similar to India. (Rahul)

ABS Expansion Timeline (Ronak Chheda - Awriga Capital)

• Question: Can you give a timeframe for ABS commissioning?
• Answer: Management "highly confident" of completion within FY27 but won't give specific month. Brownfield expansion in running plant creates dynamic challenges; safety and environmental commitments take precedence over timeline precision. In a 50,000-ton expansion context, Q3 vs Q4 distinction is "fairly precise" but management will only commit to "this financial year." (Rahul)

Thailand Financial Outlook (Tushar Raghatate - Omega Advisors)

• Question: Can Thailand reach the $0.30 EBITDA/kg level of peers? What's the 3-year framework?
• Answer: India business margins expected to remain consistent with existing business assuming similar margins with increased volumes; Thailand cost structure higher than India. With successful volume scaling through validation process, "you will see a much stronger margin profile in Thailand" - targeting within 3 years, possibly sooner. (Rahul)

Thailand Sales Strategy & Chinese Competition (Vidisha - CNK UAE)

• Question: What's the Thailand sales strategy and do you see Chinese dumping?
• Answer: Brand migration transitioned to Styrenix's own grades; deployed sales teams in Shanghai, Vietnam, Seoul, Osaka. Validation cycles 12-24 months, starting with trial lots progressing to commercial orders. Significant competitive intensity from Chinese production but differentiated product profile maintains interest. "Everything is as per our expectation and our strategy." (Rahul)

Key Takeaway

Styrenix delivered a landmark Q1 FY27 with standalone EBITDA at ₹201.4 crores (up 133.9% YoY) and margins at 26.1%, benefiting from a favorable lag between surging raw material costs (styrene monomer spiked to $1,600-1,700 from $1,000 pre-war) and product price adjustments, though this is explicitly framed by management as a "snapshot in time" not indicative of sustainable margins. Sales volumes declined 26% YoY to 38.9 KT as Middle East geopolitical disruption created 15-25% market demand destruction, particularly in non-OEM/unorganized segments, while OEM/auto demand remained relatively resilient. The company is executing a 50,000-ton ABS brownfield expansion targeting FY27 commissioning, alongside capacity additions in rubber, SAN, and compounding, with SAN merchant sales (15,000-20,000 tons/year) continuing unaffected. Thailand operations remain at low utilization with brand migration ongoing; management targets stronger margin profile within three years as customer validations (12-24 month cycle) across China, Japan, Vietnam, and Korea convert to commercial volumes. Raw material sourcing has shifted from Middle East to alternate suppliers with longer lead times, with slightly elevated inventory carried to ensure supply security. The forward outlook hinges entirely on geopolitical normalization; management refrains from volume or margin guidance, advising investors to anchor on historical normalized performance levels (10-12% EBITDA margins) while watching for demand recovery that could accelerate once stability returns.